Mobile wallets gain currency at brick-n-mortar stores too

Mobile recharges used to dominate transactions through such wallets. In time most have added on categories like DTH TV and data plan recharges, utility bill payments, cab payments, train and bus ticket bookings, and e-commerce payments.BENGALURU: Could mobile wallets be to India what credit cards are to the West? When they were launched about five years ago, they were used mostly for making online payments. Increasingly, though, they are being used to make payments in the ‘offline’ world.

Mobile recharges used to dominate transactions through such wallets. In time most have added on categories like DTH TV and data plan recharges, utility bill payments, cab payments, train and bus ticket bookings, and e-commerce payments.

Now, mobile wallet players are partnering with brick-and-mortar stores to enable payments through mobile wallets. So today, if you walk into a KFC, Pizza Hut, Costa Coffee, Vaango, BigBazaar, WH Smith, Cafe Coffee Day or Storeking, you could use your mobile to pay, instead of taking out your wallet.

The variety of purposes for which mobile wallets can now be used, and the pace of their adoption, suggests that they could replace credit cards as the primary non-cash payment model.

“The potential to grow the payments by bringing such offline channels is endless,” Vijay Shekhar Sharma, founder and CEO of Paytm, by far the biggest player in the mobile wallet space, told TOI.

The manager at a large Cafe Coffee Day outlet in Bengaluru said the mobile wallet option was introduced about four months ago, and already 10% of customers use that option. The chain provides the option of using either the MobiKwik or Oxigen wallets.

“For internet, India leapfrogged desktops and went straight to smartphones. Now, for payments, mobile wallets are helping the country leapfrog the card era. Mobile wallets will become the replacement for cash here,” Bipin Preet Singh, founder and CEO of Mobikwik, told TOI.

That may be no hyperbole. As of March, there were some 21 million credit cards issued in India, according to the Reserve Bank. In contrast, mobile wallet Paytm alone crossed 100 million accounts in August, barely five years since its inception, and MobiKwik has 25 million accounts.

This surge in adoption is partly because of the simplicity of registering for a wallet and using it. For payment at a physical store, one popular method is for the merchant to key in the customer’s mobile number on an app, which immediately generates a one-time password (OTP) on the customer’s phone. When this OTP is entered on the app, the money is deducted from the customer’s mobile wallet. If the technology works well, the time taken to complete the transaction will probably be no more than that with a credit card.

While mobile wallets involve the slight hassle of periodically refilling the wallet, it also involves fewer worries for those who fear hacking, given that the amounts in wallets tend to be substantially less than credit card limits. Retailers too are happy tying up with mobile wallets because the money now directly hits the bank, and reduces the operational cost of handling cash.

Even banks now acknowledge that mobile wallets may be the way to go in India. “The internet banking or the card economy did not pick up well and we jumped a step ahead into mobile payments using apps. These apps have become the de facto digital economy for the country and shows the underlying changes that our economy is going through,” said Abheek Barua, chief economist at HDFC Bank, which launched the PayZapp mobile payment app in June. He said banks were late in realizing this fast moving trend, but every bank was now launching similar digital wallet apps linked to consumers' bank accounts. “We are also expanding our partnerships with merchants and we will emerge stronger as we have a structural advantage,” Barua said, referring to the confidence that people have in banks.

A lot of the focus now is on offline payments, which is still by far the biggest part of the payment world. And those who are entering the space are seeing a surge in the average size of transactions. In mobile recharges, the average transaction size used to be less than Rs 200; but in physical stores, it is over Rs 600.

MobiKwik has one of the biggest retail merchants as its partner in Big Bazaar. While payments made to online merchants has an average ticket size of Rs 150, it is Rs 600-700 for transactions at places like Big Bazaar. Now, 40% of the total transaction value comes from payments made in offline channels.

PayU focuses on small and medium businesses, including tour and travel companies. “We have average ticket sizes from offline transactions of Rs 3,200,” said Gurjodh Pal Singh, VP and head of the SME business in PayU.